The Financial Conduct Authority is under increasing political pressure to withdraw its proposed FCA car finance redress scheme [1]. The regulator expects to launch a public consultation in October 2025 regarding plans to compensate for finance agreements from 2007.

Members of the House of Lords’ Financial Services Regulation Committee have warned that the proposed scope is too wide. They believe it could slow the process, delay payments to motorists and place unnecessary financial strain on lenders. A number of committee members want the FCA to be more targeted and seek to balance fairness for consumers with lending market stability [2].

The scheme is intended to settle unresolved car finance claims, many of which involve customers paying more than they should have because of commission-based sales practices that were later found to be unfair.

Peers Push for a Six-Year Limit

Several peers, led by committee chair Lord Forsyth, have suggested that the FCA limit the claims period to six years, in line with the Consumer Credit Act. They have asked the regulator whether it has taken legal advice or carried out financial modelling for a shorter claims window [3].

Those in favour of the six-year limit say it would still deliver justice to most affected drivers while avoiding the logistical problems of investigating agreements from nearly two decades ago. They warn that the current proposal could result in significant disputes over lost records, outdated addresses and lenders being unable to locate old data.

How the Car Finance Scandal Happened

The car finance scandal centres on Discretionary Commission Arrangements (DCAs). Under these arrangements, brokers were allowed to raise interest rates on finance deals in return for higher commission from lenders. This practice was banned in 2021, but by then millions of motorists had already been affected [4].

Earlier this month, the Supreme Court ruled that DCAs breached the duty to act in a customer’s best interests [5]. The decision has paved the way for both hire purchase and PCP claims to be included in any future redress scheme .

Billions at Stake in FCA Car Finance Redress

The FCA estimates that the scheme could cost between £9 billion and £18 billion [6]. While the average payout is expected to be around £950 per agreement [7], some drivers could receive more depending on the size of their overpayments and how long they had the finance agreement.

The regulator has said its aim is to create a process that is fair, consistent and transparent for all eligible motorists. Without a centralised scheme, there is a risk that payouts could differ between lenders, which could leave some consumers short-changed.

Key Operational Challenges

If the scheme goes ahead in its current form, the FCA will face a series of operational challenges:

• Locating claimants who have moved home multiple times.
• Verifying car finance claims without original paperwork.
• Reconstructing missing or deleted lender records.
• Guaranteeing that similar cases receive the same level of compensation.

Industry experts cautioned that a longer timeframe could create delays, disputes and backlogs in claims processing [8].

Should Drivers Wait or Act Now?

Some commentators suggest that motorists should wait for the FCA car finance scheme [9] to be launched before making a claim. However, this could be risky for those who have lost paperwork, moved home or are unsure who their lender was. Many may not be contacted by their lender at all.

Specialist claims firms, such as Reclaim247, can begin the process now by tracing old finance agreements, even without original documents. Acting early could help protect a driver’s right to compensation and avoid missing deadlines.

Staying Updated on the Car Finance Scandal

The FCA’s October 2025 consultation [10] will also decide whether the scheme will operate on an opt-in or opt-out basis. This decision will affect how many drivers actually receive compensation. Motorists are encouraged to follow the latest updates on car finance claims in the UK so they are ready to act when full details are released.

The Bottom Line

The FCA car finance redress scheme could deliver justice for millions of drivers caught up in the car finance scandal. But its scope will dictate whether payments go smoothly or get stalled out. A six-year claims limit might be just right for consumer protection and practical delivery.

Motorists should stay informed, prepare documents and avoid relying solely on the scheme to secure their refund.

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1. The Financial Conduct Authority is under increasing political pressure to withdraw its proposed FCA car finance redress scheme - https://www.legalfutures.co.uk/latest-news/fca-already-under-pressure-to-restrict-car-finance-redress-scheme
2. FCA to be more targeted and seek to balance fairness for consumers with lending market stability - https://www.thetimes.co.uk/article/shorten-time-limit-for-car-finance-claims-peers-tell-regulator-hhmgmmpmx
3. shorter claims window - https://www.legalfutures.co.uk/latest-news/fca-already-under-pressure-to-restrict-car-finance-redress-scheme
4. millions of motorists had already been affected - https://www.fca.org.uk/news/news-stories/fca-bans-discretionary-commission-models-motor-finance
5. Supreme Court ruled that DCAs breached the duty to act in a customer’s best interests - https://supremecourt.uk/uploads/uksc_2024_0157_0158_0159_judgment_2bb00f4f49.pdf
6. FCA estimates that the scheme could cost between £9 billion and £18 billion  - https://www.reuters.com/business/finance/uks-fca-proposes-9-billion-18-billion-pound-redress-scheme-motor-finance-claims-2025-08-03/
7. average payout is expected to be around £950 per agreement - https://www.theguardian.com/business/2025/aug/04/who-will-get-car-loan-payout-how-much-regulator
8. longer timeframe could create delays, disputes and backlogs in claims processing - https://www.thetimes.co.uk/article/shorten-time-limit-for-car-finance-claims-peers-tell-regulator-hhmgmmpmx
9. motorists should wait for the FCA car finance scheme - https://consumervoice.uk/cars/fca-moves-closer-to-possible-redress-scheme-for-mis-sold-car-finance/
10. FCA’s October 2025 consultation - https://www.fca.org.uk/news/press-releases/fca-consult-motor-finance-compensation-scheme